Offshore Oil and Gas Resources

When oil and gas production from a federal lease on the Outer Continental Shelf ends, the Interior Department's Minerals Management Service (MMS) is responsible for ensuring that the parties to the lease bear the costs of abandoning the leased area. Lease abandonment includes plugging any abandoned wells, removing structuring, and clearing lease sites, all of which must be done in a way that minimizes harm to marine life and the environment. This report discusses (1) MMS' actions to lessen the environmental impact of lease abandonment and (2) the estimated costs of lease abandonment and MMS' approach for ensuring that the government is not burdened with these costs. GAO focuses on MMS' actions in the Gulf of Mexico because almost all Outer Continental Shelf oil and gas structures are located there.

GAO found that: (1) to protect the environment, MMS has limited the use of explosives to remove oil well structures and required that wells be plugged and lease sites cleared when a lease is abandoned; (2) MMS has not encouraged the development of nonexplosive structure removal technologies to minimize environmental damage; (3) MMS does not have an inspection strategy targeting its limited resources to ensure that wells are properly plugged and lease sites cleared; (4) MMS does environmental impact statements and studies to gather information on the environmental consequences of oil and gas leases; (5) MMS has not had to pay any lease abandonment costs, since it requires a general bond for all leases and supplemental bonds to cover abandonment costs; (6) in March 1993, the active OCS leases in the Gulf of Mexico had estimated lease abandonment costs of about $4.4 billion, but were covered by bonds that totalled only $68 million; (7) MMS revised its financial capability criteria and increased bond requirements, since its previous assessments of financial capabilities were inadequate; and (8) MMS plans to phase in the increased bond amounts over time, with no deadline for completion.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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